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CIRCULAR No

CIRCULAR No. 01/2002/TT-BCN OF FEBRUARY 26, 2002 GUIDING THE IMPLEMENTATION OF A NUMBER OF ARTICLES OF THE GOVERNMENT�S DECREE No. 76/2001/ND-CP OF OCTOBER 22, 2001 ON CIGARETTE PRODUCTION AND TRADING ACTIVITIES

Pursuant to the Government�s Decree No. 76/2001/ND-CP of October 22, 2002 on cigarette production and trading activities; after consulting with the concerned ministries and branches, the Ministry of Industry hereby guides in detail a number of articles of the Decree as follows:

I. GENERAL PROVISIONS

1. This Circular guides the conditions for trading in cigarette raw materials; the conditions for production of cigarette products and the order, procedures and competence for licensing the production of cigarette products; the conditions for import of specialized cigarette machinery and equipment, cigarette raw materials, cigarette papers; the management of capacity and investment in production of cigarette products; management, inspection and handling of specialized cigarette producing machinery and equipment.

2. This Circular applies to enterprises of all economic sectors, which are set up under Vietnamese laws and engaged in cigarette production and business activities on the Vietnamese territory.

3. The trading in cigarette raw materials is a conditional business line requiring no permits. Enterprises of all economic sectors may trade in cigarette raw materials only when satisfying all conditions prescribed in this Circular.

4. The State shall monopolize the cigarette production and only State enterprises licensed by the Ministry of Industry to produce cigarette products can produce them. Enterprises engaged in cigarette production activities must strictly comply with the provisions of this Circular.

Foreign-invested enterprises engaged in the production of cigarette products can produce cigarettes within the scope of their investment licenses and must abide by the provisions of the Law on Foreign Investment in Vietnam and the Government�s Decree No.76/2001/ND-CP of October 22, 2001 on cigarette production and trading activities.

5. Specialized cigarette machinery and equipment (specified in the Appendix to this Circular), cigarette raw materials, cigarette papers (for rolling the cigarette section containing shredded tobacco) are imported goods subject to the Industry Ministry�s specialized management.

6. Intensive investment, renewal of manufacturing equipment and technologies; investment in new construction, investment in expansion of production establishments due to their relocation or in production for export must be in line with the planning on development of the cigarette industry in each period, approved by the Prime Minister, and must not exceed the total production capacity determined and announced by the Ministry of Industry.

II. TRADING IN CIGARETTE RAW MATERIALS

1. Conditions on business subjects:

Traders are enterprises having business registration for goods items being cigarette raw materials.

2. Conditions on material and technical foundations as well as equipment and facilities:

a) The raw materials-purchasing and-collecting establishments must be large enough and compatible with the business scale and each covers a total area of at least 500 m2, comprising the sorting area, the packing area and the warehouse.

b) There are separate warehouses for cigarette raw materials, which must be furnished with ventilation system as well as equipment and devices suitable to the requirement of preserving cigarette raw materials, including temperature and humidity meters for checking the relative air temperature and humidity in the warehouses; anti-worm preventing and combating means; must be adequately furnished with shelves and/or platforms to hold cigarette bales arranged at least 20 cm above the floor and at least 50 cm from walls and pillars.

c) The purchasing and collecting locations must be put up with signboards inscribed with the names of traders dealing in cigarette raw materials and must have cigarette raw materials samples according to the classified standards set by the Ministry of Industry.

3. Conditions on environmental protection, fire and explosion prevention and fighting:

The purchasing and collecting establishments must be adequately furnished with fire- fighting means and equipment and ensure environmental hygiene and safety according to the State�s regulations.

III. PRODUCTION OF CIGARETTE PRODUCTS

A. CONDITIONS FOR PRODUCTION OF CIGARETTE PRODUCTS

1. Conditions on business subjects:

They are State enterprises set up under the provisions of law and carrying out the production of cigarette products before the time of promulgating the Government�s Resolution No.12/2000/NQ-CP of August 14, 2000 on the national policy to prevent cigarette harms in the 2000-2010 period, and managed by the provincial or municipal People�s Committees or Vietnam Cigarette Corporation.

2. Conditions on investment in and use of home-grown cigarette raw materials:

a) Enterprises producing cigarette products must use home-grown cigarette raw materials for the production of cigarette products at the rate set by the Ministry of Industry, except for case of production of international label- cigarettes or cigarette products for export. This rate shall be stipulated in each period, suitable to the scheme on development of cigarette raw materials zone, approved by the Prime Minister.

b) Enterprises producing cigarette products must participate in investment in growing cigarette raw materials in form of direct investment or investment cooperation through cigarette raw materials traders directly investing in tobacco growing in compatibility with the enterprises� production and business scales as well as the scheme on development of cigarette raw materials zones, approved by the Prime Minister.

3. Conditions on production output:

The output of cigarette products turned out by enterprises, which shall be converted into rolled cigarettes (type of 20 cigarettes/pack) must reach 50 million packs/year or more.

4. Conditions on machinery and equipment:

a) Enterprises manufacturing cigarette products must have specialized machinery and equipment, including those for major production stages: fiber processing, cigarette rolling, packing.

b) The fiber-processing stage must be furnished with minimum equipment ensuring the synchronism of the stage, including steamer, moisture raiser, materials feeder, leaf storing and warming silos, cutter, fiber dryer, aroma sprayer, mixer and quantification scales.

The fiber-processing chain must be specialized and arranged in a space satisfying industrial hygiene, labor safety and environmental sanitation standards.

c) Enterprises having no fiber-processing chains must have fiber-processing contracts. Units undertaking the processing must satisfy the conditions prescribed at Point b above.

d) At the stage of cigarette rolling, packing, cartonning, enterprises must use automatic rolling, packing and cartonning machines, except for cases where cigarette products must be manually turned out by traditional methods.

e) Enterprises manufacturing cigarette products must have minimum inspecting equipment to carry out measurement for inspection of quality criteria such as cigarette weight, cigarette circumference, cigarette press reduction degree, dust content in fiber. For other physio-chemical criteria and cigarette hygiene criteria, enterprises may inspect by themselves or through service units with inspection function. The inspection results must be systematically archived for long-term monitoring.

f) All machinery and equipment used for the production of cigarette products must have lawful origins. Enterprises must not rent or borrow cigarette-machinery and equipment owned by organizations and/or individuals that have no function to produce cigarette products.

5. Conditions on cigarette product quality, hygiene and safety:

Cigarette- producing establishments must satisfy the requirements on quality and establishment hygiene according to Vietnam Standards, branch standards and the Health Ministry�s Decision No.4196/1999/QD-BYT of December 29, 1999 promulgating the Regulation on foodstuff quality, hygiene and safety.

6. Conditions on ownership of trademarks

Cigarette-manufacturing enterprises must have the right to own or lawfully use trademarks which have been registered and protected in Vietnam.

7. Conditions on environment and fire and explosion prevention and fighting:

Cigarette-manufacturing enterprises must be adequately furnished with fire-fighting devices and equipment and ensure environmental hygiene according to the State�s regulations.

B. COMPETENCE, ORDER AND PROCEDURES FOR LICENSING THE PRODUCTION OF CIGARETTE PRODUCTS

1. The Ministry of Industry shall be the body competent to license the production of cigarette products.

2. The dossier of application for a license to manufacture cigarette products shall include:

a) The application for the cigarette- manufacturing license.

b) The valid copy of the business registration certificate.

c) Documents relating to the business criteria and conditions prescribed in this Circular, including:

- The report on business operation results of the enterprise for the three latest years, clearly stating the production output criteria for each group of cigarette products (the converted output).

- The list of machinery and equipment, cigarette-production capacity and the capacity of each stage, converted into 20 cigarette- packs, calculated on 2 shifts/day for 3 latest years. The dossiers evidencing the lawful origins of machinery and equipment.

- The fiber-processing contract, quality inspection service contract (if any).

- The declaration of acreage of warehouses, workshops, working offices and other support areas.

- The valid copy of the quality registration paper or the quality standard compatibility announcement.

- The valid copies of papers certifying the ownership or the lawful use of trademarks for cigarette products.

- The valid copy of the environment permit or the certificate of assessment of impacts on environment, granted by competent bodies.

- The valid copy of the certificate of fire-fighting safety, issued by the competent police office.

3. The order of licensing the production of cigarette products:

a) Within 30 days as from the date of receiving the complete and valid dossiers, the Ministry of Industry shall consider and license the production of cigarette products. In case of refusal, it must give written reply and clearly state the reasons therefor.

b) In cases where the dossiers are incomplete, within 7 days as from the date of receiving the dossiers from enterprises, the Ministry of Industry shall request in writing the enterprises to supplement the dossiers.

4. A license shall be issued in 5 copies: 2 copies shall be archived at the Ministry of Industry, 1 sent to the Industry Department of the province or city where the enterprise is headquartered, 1 sent to the superior managing agency of the enterprise, and 1 to the licensed enterprise.

5. A license for manufacturing cigarette products shall be valid for 5 years. 30 days before its expiry, the concerned enterprise must send a written request for extension to the Ministry of Industry for consideration and decision.

6. Enterprises manufacturing cigarette products shall have their licenses revoked if they seriously violate the conditions for manufacture of cigarette products and other provisions of this Circular or if they are merged or dissolve.

7. Enterprises licensed to manufacture cigarette products must pay a fee amount as provided for by the Ministry of Finance.

IV. INVESTMENT IN MANUFACTURE OF CIGARETTE PRODUCTS

1. Management of cigarette product- manufacturing capacity:

a) The prescribed general production capacity is the synchronous production capacity in the cigarette products- manufacturing chain (including major machinery and equipment at various stages of fiber processing, cigarette rolling, packing) and is calculated on 2 shifts/day at the time of promulgating the Government�s Resolution No.12/2000/NQ-CP of August 14, 2000 on the national policy to prevent and combat cigarette harms in the 2000-2010 period.

b) The Ministry of Industry shall coordinate with the concerned agencies and Vietnam Cigarette Corporation in determining and announcing the general production capacity of each unit for use as basis for investment in the production of cigarette products and the import of specialized cigarette machinery and equipment.

- Enterprises may make investment to raise their production capacities in cases of producing cigarettes for export and may only produce within the determined and announced general capacities.

- Annually, units must send statistical reports on their cigarette production capacities to the Ministry of Industry.

2. A number of stipulations on intensive investment in the production of cigarette products:

a) Before elaborating the construction investment projects, investors must obtain the written consent of the Ministry of Industry. Within 15 days as from the date of receiving the enterprises� written requests, the Ministry of Industry must reply them in writing; in case of refusal, it must clearly state the reasons therefor.

b) The written requests contain the following details: the project�s name, location, major relevant technical parameters, the plan for handling of replaced machinery and equipment (if replacement investment is made).

c) After getting the written consent of the Ministry of Industry, the enterprises shall deploy the investment according to the investment and capital construction order and procedures prescribed by the State.

d) Enterprises must report to the Ministry of Industry on the results of handling the specialized cigarette machinery and equipment replaced in the course of investment.

V. IMPORT OF SPECIALIZED CIGARETTE MACHINERY AND EQUIPMENT, CIGARETTE RAW MATERIALS, CIGARETTE PAPERS

1. The specialized cigarette machinery and equipment, cigarette raw materials and cigarette papers are import goods subject to the specialized management of the Ministry of Industry. Only enterprises licensed to produce cigarette products can import the above-said commodities.

2. Enterprises may directly conduct the import or entrust the import of specialized cigarette machinery and equipment, cigarette raw materials and/or cigarette papers to units with export and import business function in service of production.

3. Import of specialized cigarette machinery and equipment:

a) The imported specialized cigarette machinery and equipment must be compatible with the production capacities of the enterprises manufacturing cigarette products.

b) Within 10 days as from the date of receiving the import requests from the enterprises, based on the already approved investment projects, the Ministry of Industry shall issue written approval or disapproval of the import of machinery and equipment by the enterprises.

4. Import of cigarette raw materials, cigarette papers:

a) Annually on November 15 at the latest, the cigarette product- manufacturing enterprises must send their requests for the import of cigarette raw materials, cigarette papers for the subsequent year to the Ministry of Industry. On the basis of production output, the percentages of using home-grown cigarette raw materials and the report of Vietnam Cigarette Corporation on the capability to supply domestic raw materials, on December 15 every year at the latest, the Ministry of Industry shall send written notices on import plans to the enterprises and relevant agencies.

b) The imported cigarette raw materials and cigarette papers can be used only for the production of cigarette products according to the enterprises� production plans. If they are not used up, they can be resold only to enterprises which have been licensed to manufacture cigarette products.

5. For cases of importing cigarette raw materials in service of production, the Ministry of Industry shall consider and settle case by case on the basis of the enterprises� requests and the dossiers relating to the export plans.

6. Annually, the cigarette product- manufacturing enterprises must report on the import and use of the imported specialized cigarette machinery and equipment, cigarette raw materials and cigarette papers in the period to the Ministry of Industry.

VI. MANAGEMENT, CONTROL AND HANDLING OF SPECIALIZED CIGARETTE MACHINERY AND EQUIPMENT

1. Organizations and individuals that have no licenses to manufacture cigarette products must not use specialized cigarette machinery and equipment for the manufacture of cigarette products.

2. Specialized cigarette machinery and equipment having no lawful origins shall be confiscated and handled according to law provisions.

a) The specialized cigarette machinery and equipment shall be considered unlawful in the following cases:

- Being imported before the time of promulgating Directive No. 13/1999/CT-TTg of May 12, 1999 without valid import papers and procedures.

- Being imported after the time Directive No. 13/1999/CT-TTg of May 12, 1999 took effect but without valid import papers and procedures and the written consents of the Ministry of Industry.

b) The handling of confiscated specialized cigarette machinery and equipment shall comply with the current regulations and they can be resold only to enterprises licensed to manufacture cigarette products.

3. The sale and liquidation of specialized cigarette machinery and equipment of cigarette product- manufacturing enterprises must comply with the State�s current regulations on liquidation of property and also with the following stipulations:

a) Enterprises can only sell machinery and equipment which still have use value to enterprises licensed to produce cigarettes.

b) Machinery and equipment which have no more use value must be liquidated in form of discarded materials.

c) After selling or liquidating them, enterprises must report to the Ministry of Industry on the results thereof.

4. The Ministry of Industry shall assume the prime responsibility and coordinate with the police, market control and customs forces in organizing the inspection, detection and handling of specialized cigarette machinery and equipment without lawful origins.

VII. IMPLEMENTATION PROVISIONS

1. This Circular takes effect 15 days after its signing for promulgation; previous regulations contrary to the provisions of this Circular shall all be annulled.

2. Those traders who are dealing in cigarette raw materials and have registered their business operations before the date of promulgating this Circular may continue their business activities but have to fully satisfy the conditions prescribed in this Circular within 4 months as from the date this Circular takes effect.

3. Within 90 days as from the date this Circular takes effect, the enterprises which satisfy all conditions on the business subjects as provided for in Section III.A, if wishing to continue the manufacture of cigarette products, must apply for the granting of licenses for manufacture of cigarette products and file dossiers for registration at the Ministry of Industry. Pending the granting of licenses, the enterprises shall continue their operation till the Ministry of Industry issues written approval or disapproval of the granting of licenses for production of cigarette products.

4. Enterprises engaged in activities of cigarette raw materials trading, cigarette product manufacture and/or import of specialized cigarette machinery and equipment, cigarette raw materials as well as cigarette papers shall have to strictly comply with the guidance in this Circular.

5. If any problems arise in the course of implementation, they should be reported to the Ministry of Industry for timely consideration, amendment and/or supplementation.

For Minister of Industry

Vice Minister
CHAU HUE CAM

Appendix

LIST OF SPECIALIZED CIGARETTE MACHINERY AND EQUIPMENT

(Issued together with the Industry Ministry�s Circular No.01/2002/TT-BCN of February 26, 2002)

I. Cigarette raw materials- processing chain

A. Tobacco leaf- processing stage:

1. Leaf stalk cutter

2. Humidifying syringe

3. Leaf- warming shelter (leaf- storing and -warming silo)

4. Leaf- dryer (drying, cooling, softening)

5. Leaf bale weighing and packing (pressing) system.

B. Stem-processing stage

1. First stem-moistening syringe

2. Second stem-moistening syringe

3. Stem-stripping and leaf- separating system

4. Stem-drying machine (drying, cooling, softening)

5. Stem-sorting, cleaning machine

6. Stem- weighing and packing (pressing) system.

II. Fiber-processing chain

A. Leaf- processing stage

1. Vacuum steaming equipment

2. Leaf stalk cutter

3. Leaf- moistening syringe

4. Material feeders.

5. Leaf- warming shelter (leaf-storing and warming silo)

6. Metal prober.

7. Leaf shredder

8. Fiber-swelling equipment.

9. Leaf-drying equipment (drying, cooling, solftening)

10. Quantification weighing system.

B. Stem- separating stage

1. Stem-stripping machine

2. Syringe for the first stem moistening

3. Stem-warming shelter (stem-storing and warming silo)

4. Syringe for the second stem moistening.

5. Stem-rolling equipment

6. Stem-slicing machine

7. Stem-swelling equipment

8. Stem-drying equipment

9. Stem-separating equipment

10. Stem-warming shelter (stem fiber- warming silo).

11. Quantification scales system

C. Fiber- mixing stage

1. Aroma-spraying equipment

2. Fiber-warming shelter (fiber-warming silo).

3. Fiber- conveying system (acrodynamic or mechanical)

III. Cigarette- making machinery and equipment

A. Cigarette-rolling and filter-setting stage

1. Cigarette- rolling machine

2. Filter- setting machine

3. Tray- charging machine

B. Packing stage

1. Packing machine

2. Cellophane packing

3. Carton- packing machine

4. Box-packing machine.

5. Containerizing machine (for cartons).-